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Pitfalls associated with an Interim Injunction

It may be thought necessary, during the course of a legal dispute, for a claimant to seek interim relief by way of an injunction. This is usually the case when the claimant feels that the defendant’s actions may, if not stopped, cause irreparable damage to the commercial activities of the claimant. However, on the basis that interim injunctions severely curtail a defendant’s rights, and are usually granted before the merits of the respective parties’ arguments have been fully considered at full trial, the claimant is required to give a cross-undertaking in damages, which can be enforced against the claimant if at full trail the court finds that the injunction was incorrectly granted and as a consequence the defendant has incurred losses.

The recent interim Patents Court decision of
Napp Pharmaceutical Holdings Limited v (1) Dr Reddy's Laboratories (2)
Sandoz Limited (and others)
[2017] EWHC 1433 (Pat) provides guidance on how the court calculates
damages associated with an interim injunction and more specifically what
information should be disclosed in order for the damages to be calculated.

By way of background, the patentee, Napp Pharmaceutical Holdings Limited
(Napp), brought a claim for patent infringement and an interim injunction
against, amongst others, Sandoz Limited (Sandoz). As part of the claim,
Napp gave a cross undertaking in damages which notably provided that other
companies in Sandoz's group would be entitled, if appropriate, to join a
claim for damages. The case was expedited and in around 8 months both the
first-instance trial and appeal were conducted, both of which Napp lost
resulting in a discharge of the injunction.

As expected, Sandoz brought an application for damages based on Napp's
cross-undertaking, introducing three companies and seeking a sum in the
order of £100 million - a figure higher than the annual value of the
market. Sandoz's argument was that the effect of being kept off the market
for 6 months led to permanent effects on the market and thus losses which
run into the future. Napp's response was to file a lengthy request for
further information including the profit margin and price that Sandoz would
have been charging for the relevant products - information Sandoz was
hoping to withhold from its closest competitor. Sandoz argued that using
the calculations provided in their Points of Claim one could calculate from
the total loss claimed a form of blended lost profit figure. Importantly
the blended lost profit figure would be blended across all different kinds
of products and also, critically, among the other group companies who were
part of the claim. This approach was held to be insufficient.

Based on the requests for further information made by Napp that were
enforced by the Court, the bullet points below identify information which
is likely to be deemed essential to calculating damages associated with an
injunction.

The relationship
between each of the companies introduced into the claim on the
cross-undertaking

An explanation as
to how each company has suffered loss as a result of the interim injunction

An explanation as
to the basis upon which the per annum growth of the market has been
predicted including the predicted sales volume figures

Pricing information
on each relevant product

The percentage
profit margin on each relevant product

Thus, whilst enforcement of a cross-undertaking in damages can have
substantial financial repercussions for a claimant of the main trial, it
can also force the defendant to disclose confidential information to what
may be its closest competitor.